Dollar Index May Climb More, JPMorgan Says: Technical Analysis

The Dollar Index may extend its climb beyond a two-year high after rising above a key technical level, according to JPMorgan Chase Co.

The gauge closed yesterday at 83.568, breaking through a resistance level at 83.55 as it exceeded its June 1 high, Niall O’Connor, a New York-based technical analyst at the firm, wrote today in a client note. It now may rise to 84.93, he said in an interview. The dollar has gained as the euro and higher-yielding currencies have slid amid European financial turmoil, he said.

“The dollar’s strength has been through the euro’s weakness, and the Dollar Index has been range-bound,” O’Connor said. “Now, we’re starting to see other dollar pairs weaken against the dollar, like we’ve seen in the commodity currencies today, so it’s more confirmation of a broader dollar move.”

The index rose as much as 0.3 percent today to 83.829, the highest since July 2010. The greenback strengthened against all of its 16 most-traded counterparts tracked by Bloomberg except the yen. The Australian and New Zealand dollars, whose countries export commodities, fell against most peers.

Intercontinental Exchange Inc. uses the Dollar Index to track the greenback against the currencies of six major U.S. trading partners. The 84.93 level, the highest since June 2010, is the 76.4 percent Fibonacci retracement of a two-year decline. A drop below 82.95 may signal a short-term end to the rally, O’Connor said.

Resistance is a level on a chart where sell orders may be clustered. Fibonacci analysis is based on the theory that prices increase or decrease by certain percentages after reaching new highs or lows. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

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